High Bank Fees Have the Potential to Reduce Financial Inclusion

Barbadians have achieved a high level of financial inclusion, but it is not something the island can afford to take for granted. This is according to Central Bank of Barbados Governor Cleviston Haynes.

Speaking to members of the Barbados Association of Insurers and Financial Advisors (BARAIFA), Haynes confirmed that while globally one in five people do not have access to financial services, the 2016-2017 Barbados Survey of Living Conditions revealed that almost 100 percent of the people polled had either a savings or chequing account. He cautioned, however, that there are potential risks to that level of inclusion, citing high banking fees as one of those challenges.

“Barbadians have not traditionally been avid investors. Instead most persons opted to place their money in savings accounts and let it earn interest. Now accountholders are confronted with charges associated with maintaining an account: ATM fees, teller fees, minimum balance fees, paper statement fees, large value withdrawal fees, and monthly service charges, to name a few.”

Haynes noted that these various charges, combined with the low interest rates currently being offered by commercial banks, could turn off would-be savers:

“We could be faced with a situation where persons withdraw from the financial system either because they literally cannot afford to have a bank account, or because they are not willing, as I have heard said, to ‘pay banks to keep their money’.”

While acknowledging their frustration, Haynes stressed that it would not be a good idea for Barbadians “to return to the old days and keep their money in a tot,” adding, “we need our citizens to understand why that is not a wise option.”

The Governor took the opportunity to explain how the Central Bank would be addressing the issue. On the regulatory end, he announced that the Bank would soon issue updated guidance to commercial banks on the matter of fees and would also publish the key fees and charges of those institutions on the Central Bank’s website.

He also highlighted the need for public education, revealing that his organisation will partner with the Financial Services Commission and other entities on a financial literacy campaign. “Very often, we assume that everyone understands the basics of budgeting, saving, and investing, but this is not always the case.”

This understanding is key, said the Governor, because it has implications for financial inclusion.

“We can presently boast a level that is higher than the global average and we must preserve this accomplishment.” Haynes then called on those present to assist in the effort. “Together, let us therefore act to ensure that no one is excluded from Barbados’ financial system.